Correlation Between GUOMAI Culture and Guangzhou KingTeller

Can any of the company-specific risk be diversified away by investing in both GUOMAI Culture and Guangzhou KingTeller at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GUOMAI Culture and Guangzhou KingTeller into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GUOMAI Culture Media and Guangzhou KingTeller Technology, you can compare the effects of market volatilities on GUOMAI Culture and Guangzhou KingTeller and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GUOMAI Culture with a short position of Guangzhou KingTeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of GUOMAI Culture and Guangzhou KingTeller.

Diversification Opportunities for GUOMAI Culture and Guangzhou KingTeller

0.49

Correlation Coefficient

GUOMAI Culture  Guangzhou KingTeller

Very weak diversification

The 3 months correlation between GUOMAI and Guangzhou is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding GUOMAI Culture Media and Guangzhou KingTeller Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KingTeller and GUOMAI Culture is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GUOMAI Culture Media are associated (or correlated) with Guangzhou KingTeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KingTeller has no effect on the direction of GUOMAI Culture i.e., GUOMAI Culture and Guangzhou KingTeller go up and down completely randomly.

Pair Corralation between GUOMAI Culture and Guangzhou KingTeller

Assuming the 90 days trading horizon GUOMAI Culture Media is expected to generate 0.75 times more return on investment than Guangzhou KingTeller. However, GUOMAI Culture Media is 1.33 times less risky than Guangzhou KingTeller. It trades about -0.32 of its potential returns per unit of risk. Guangzhou KingTeller Technology is currently generating about -0.31 per unit of risk. If you would invest  3,181  in GUOMAI Culture Media on October 11, 2024 and sell it today you would lose (744.00) from holding GUOMAI Culture Media or give up 23.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

GUOMAI Culture Media  vs.  Guangzhou KingTeller Technolog

GUOMAI Culture Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GUOMAI Culture Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GUOMAI Culture is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guangzhou KingTeller

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou KingTeller Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou KingTeller sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GUOMAI Culture and Guangzhou KingTeller

The main advantage of trading using opposite GUOMAI Culture and Guangzhou KingTeller positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GUOMAI Culture position performs unexpectedly, Guangzhou KingTeller can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Guangzhou KingTeller will offset losses from the drop in Guangzhou KingTeller's long position.

The idea behind GUOMAI Culture Media and Guangzhou KingTeller Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.